CSL Shaves Guidance as Competition Heats Up-- Update

By Rebecca Thurlow 

SYDNEY-- CSL Ltd., Australia's largest pharmaceutical company, warned rising competition in the blood-plasma-therapies market will crimp its full-year earnings growth, after its first half profit missed market expectations.

The blood-products-and-vaccines maker has been expanding globally in recent years, making acquisitions and taking advantage of difficulties faced by rivals -- such as product recalls and plant closures -- to boost its own sales. Those easy market-share gains are set to slow, as rivals including Baxter International Inc. open new facilities and overcome supply constraints.

"We expect that global demand for plasma therapies will continue to grow, but the market will become increasingly competitive, with new competitors and new products," said Chief Executive Paul Perreault.

CSL said Wednesday its net profit in the six months through December rose 9.1% to US$705.0 million in constant currency terms, below the US$711.1 million median of four analyst forecasts compiled by The Wall Street Journal. Revenue from the sale of immunoglobulin products, used in treating immunity conditions, slowed.

The company, which operates in more than 20 countries and generates most of its revenue outside Australia, now expects net profit this financial year to rise by about 10% in constant-currency terms, down from a 12% rise flagged by management in August.

CSL shares initially fell nearly 10% on the result, hitting a low of A$81.48, before recovering slightly to be down 7.8% at A$82.99 in late trading. Broker Citi recommended selling CSL following the result.

"Multiple competitive threats could see CSL lose market share through financial year 2015 and financial year 2016 in its immunoglobulin franchise and its hemophilia franchise," the broker said. Immunoglobulin is essentially pooled antibodies from healthy blood donors which are used to treat patients with serious immune deficiencies.

The company said first-half sales rose 8.3% to US$2.8 billion in constant currency terms. Sales of immunoglobulin products grew 5% in constant currency terms, driven by ongoing demand for Hizentra, a subcutaneous immunoglobulin treatment, in the U.S. and Europe. Subcutaneous immunoglobulin products use a small needle inserted into the tissue just below the surface of the skin, rather than into a vein, allowing them to be administered at home.

CSL's top-selling product is its liquid intravenous immunoglobulin product, Privigen. Demand for Privigen was strong in Europe where authorities expanded its allowed uses, however increased competition reined in demand in the U.S. where sale prices are higher, Mr. Perreault said.

CSL also makes and distributes vaccines, including for seasonal flu, and receives royalties from Merck & Co. for the rights to distribute a human papillomavirus vaccine, Gardasil, which it helped to develop. Human papillomavirus can cause cervical cancer. In October, CSL agreed to buy Novartis AG's influenza-vaccine business for US$275 million.

Write to Rebecca Thurlow at [e-mail]

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